Wednesday’s Mid-Day Movers: 3 Stories Driving Markets

The U.S. equity markets were down but relatively flat on Wednesday afternoon. Investors, who have tried to turn their collars up to economic headwinds in order to focus on earnings, couldn’t ignore today’s report that fourth-quarter GDP unexpectedly shrank.

At 12:30 p.m.: DJIA: -0.13%, S&P 500: -0.11%, NASDAQ: -0.04%.

Here are three stories moving markets on Wednesday:

1) With the deepest cuts to defense spending in 40 years, fewer exports, and low growth in business stockpiles, the United States economy unexpectedly shrank from October to December, according to advance figures released by the U.S. Department of Commerce’s Bureau of Economic Analysis.

Real gross domestic product, the output of goods and services produced by labor and property located in the United States, contracted by 0.1 percent in the last quarter — the first drop in three-and-a-half years. This represented a significant slowdown from the 3.1 percent growth reported in the previous three months… (Read more.)

2) The health of the labor market is perhaps the most-watched facet of any economy. Employment data can lead to a thousand economic insights, allowing investors to make more informed decisions about market conditions. When job growth is slow or negative, interest rates are likely to decline — as we have seen over the past few years — boosting stock and bond prices as a result. When job growth is high, the threat of wage inflation rears its head, interest rates may rise, and bond and stock prices would react by falling.

This is why investors are paying a lot of attention to the ADP National Employment Report for January, which showed that 192,000 non-farm private-sector jobs were added for the month, its highest level since February of last year… (Read more.)

3) On Wednesday, U.S. Federal Reserve officials conclude their two-day monetary policy meeting. Speculation has been rising that the central bank may soon give the printing presses a break, but a weak economy and currency wars are still providing plenty of cover for bond purchases.

Last month, the Federal Reserve started to inject the idea that policymakers were divided about conducting bond purchases beyond this year. The Federal Open Market Committee December minutes stated: “Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.” (Read more.)